Working tax credit was one of the UK's main tools for supporting people in paid work on a low income. The system officially closed on 5 April 2025, and most people now claim universal credit instead. This article explains how working tax credit used to work, what happened when it ended, and what you need to do now-whether you're finalising an old award or looking for new financial support.
Key Takeaways
You can no longer make a new claim for working tax credit or child tax credit after 5 April 2025. The only remaining activity is HMRC finalising old awards for the 2024/25 tax year and earlier. All active tax credit awards have ended as of 2026, with no payments continuing into 2025/26.
Existing working tax credit and child tax credit claims stopped from 6 April 2025. Claimants of working tax credit were migrated to universal credit or, if over state pension age, pension credit.
If you previously received tax credits, you still need to finalise your last award with HMRC. This means checking your Annual Review letter, confirming your income for tax credit purposes (including employment income, self employed profits, and other income), and responding by the deadline.
Working tax credit has been largely replaced by universal credit for most people of working age. If you need ongoing help with living costs, childcare, or housing, universal credit is now the main route.
This article covers how working tax credit was calculated, who qualified, how it linked with child tax credit, and what to do now if you need financial support.
What Was Working Tax Credit?
Working tax credit was a means-tested benefit paid by HM Revenue and Customs (HMRC) to top up the incomes of people in paid work who earned relatively little. It was a UK benefit designed to top up low incomes, and it could be claimed whether or not the person had dependent children.
It sat within the broader tax credits system alongside child tax credit. Together, these two credits formed the government's main method of supporting low-income working households for over two decades. HMRC administered both, using annual household income to assess how much each person or couple was entitled to receive.
One of its most valuable features was the childcare element. It provided extra help with registered childcare costs, covering up to 70% of eligible childcare expenses-up to £175 per week for one child or £300 per week for two or more children.
The last full tax year in which working tax credit operated was 2024/25. All ongoing tax credit awards ended on 5 April 2025, and no payments have been made since. Universal credit now replaces working tax credit and provides most new low income support for working age people.
Working Tax Credit Has Ended – What That Means Now
The tax credits system closed completely on 5 April 2025. From 6 April 2025, HMRC stopped making payments under working tax credit and child tax credit, and the shift to universal credit and pension credit became the only route to ongoing support.
New claims for working tax credit cannot be made. This applies even if someone's income falls sharply, they start a new job, or their circumstances change. There is no exception for fresh applications-only the finalisation of awards that were already running before the closure date.
Existing tax credit claims, whether for working tax credit alone or combined with child tax credit, stopped at the end of the 2024/25 tax year. Payments no longer continue into 2025/26 under any circumstances.
However, you may still receive letters from HMRC during 2025/26 asking you to confirm your income and circumstances for the last year of your award. This is part of the Annual Review process, where HMRC checks whether your actual income matched what was used to calculate your payments.
Most people of working age who need ongoing support will generally have to claim universal credit. Those who have reached state pension age may instead need to look at pension credit.
Who Used to Qualify for Working Tax Credit?
This section is historical, but it's still useful if HMRC is checking your old award or you need to understand why your payments were set at a particular level.
Eligibility for Working Tax Credit depended on age, income, and working hours. You needed to be in paid work-either as an employee or self employed-and resident in the UK. A National Insurance number is needed to apply for benefits in the UK, and this was a basic requirement for claiming tax credits. You also had to provide proof of identity such as a passport or driving licence when applying.
The minimum working hours a week varied depending on your circumstances:
Circumstance | Minimum Hours a Week |
|---|---|
Lone parents with dependent children | 16 hours |
Couples with children (combined) | 24 hours (at least one working 16) |
Disabled workers | 16 hours |
Single people aged 60 or over | 16 hours |
Individuals aged 25 or over without children or disability | 30 hours |
Lone parents must work 16 hours or more weekly to qualify. Couples with children need 24 hours of combined work weekly, with at least one partner working 16 hours. Disabled workers must work 16 hours or more weekly to qualify. Individuals aged 25 or over without children or a qualifying disability must work 30 hours or more weekly. Single people aged 60 or over must work 16 hours or more weekly.
Claiming tax credits was possible whether or not someone also received child tax credit, but many households received both together. Certain groups, such as people getting carer's allowance or those with a qualifying disability, could qualify with lower hours or different conditions.
You could claim if your job starts within seven days of your application. In most cases, claims could only be back-dated one month, so timing mattered. If you stopped work, you may receive a 'run on' for four weeks after stopping work, giving a short buffer before payments ended. While you could previously claim working tax credit if already receiving it (for example, renewing or updating an existing award), that option no longer exists.
Self-employed claimants need a Unique Tax Reference number from HMRC to verify their trading status.
How Working Tax Credit Was Calculated
Working tax credit was calculated using various elements. HMRC added together all applicable elements based on your circumstances to arrive at a maximum award figure, then reduced that amount according to your household income.
Elements include basic, couple, and disability components, plus additional elements for severe disability, 30-hour working, and childcare. For the 2024/25 tax year (the last year of operation), the main element amounts were:
Element | Annual Amount (2024/25) |
|---|---|
Basic element | £2,435 |
Couple or lone parent element | ~£2,500 |
Disability element | £3,935 |
Severe disability element (additional) | £1,705 |
30-hour element | £1,015 |
Childcare element (up to) | 70% of eligible cost |
The maximum award is based on combined elements before withdrawal. Once HMRC added up all your qualifying elements, the total represented the most you could receive before your income was taken into account.
Income over £7,955 reduces working tax credit entitlement. The withdrawal rate is 41% for income above £6,420-meaning for every £1 of income above the relevant threshold, your award dropped by 41p. Changes in working hours can affect your tax credit award: for example, your tax credit may increase if you start working 30 hours or more per week, because the 30-hour element would be added to your maximum award. You must report changes in working hours to HMRC within one month, as this directly affected your entitlement.
Awards were always based on household income, not individual income. If you were part of a couple, your partner's earnings, pension, and other income all counted. Errors in reporting could lead to underpayments or overpayments that HMRC would later adjust.
Interaction with Child Tax Credit
Working tax credit and child tax credit formed a single combined tax credit award when the household had children. HMRC treated both as part of a unified calculation, using shared income thresholds and tapering rules.
Income withdrawal worked in layers. First, working tax credit elements were reduced as income rose above the lower threshold. Once working tax credit was fully withdrawn, the taper continued into child tax credit elements. For households that did not work enough hours for working tax credit, they could still claim child tax credit on its own at a higher income threshold (£19,995 in 2024/25), with the same 41% withdrawal rate.
Child tax credit and working tax credit amounts could change mid-year when income changed significantly, or when circumstances such as childcare costs or the number of children in the household changed. HMRC could revise entitlement during the year or at the Annual Review.
Both child tax credit and working tax credit were replaced by universal credit for most new claims, even before the final closure in April 2025.
Assessment of Income for Tax Credits
Income for tax credits was broadly based on taxable income rules, but calculated at household level rather than per person.
The main income sources HMRC looked at included:
Income from employment (wages, bonuses, taxable benefits)
Profits from being self employed
Pensions (State Pension, occupational, personal)
Some benefits and other income such as rental property income, savings interest, and investment income above a set disregard
HMRC allowed certain deductions when working out income for tax credit purposes. Gross pension contributions and gift aid donations could reduce your taxable income figure. National insurance contributions were handled separately and did not directly reduce the income used for tax credits.
There was an income disregard for small increases in income between tax years-set at £2,500 in the final years. This meant that if your income rose by less than £2,500 compared to the previous year, HMRC used the previous year's figure, reducing the risk of constant changes in awards and overpayments.
If you have not given HMRC your final income figures for the 2024/25 tax year, you may still receive queries or adjustments even after tax credits have ended.
Income for Tax Credits: Employment, Self-Employment and Other Income
This section is a practical guide for understanding what HMRC looked at when finalising working and child tax credit awards up to 5 April 2025. Households had to include income from employment, self employed earnings, and a range of other income sources, following HMRC rules.
Accurate income figures are still important when responding to HMRC Annual Review letters for 2024/25. If you have recently received one of these letters, check every figure carefully.
Keep payslips, P60s, Self Assessment tax returns, and statements of other income for the 2024/25 tax year in case HMRC queries your figures. The following subsections give high-level prompts for each main income type.
Income from Employment
Employment income for tax credits was based on your gross pay for the relevant tax year. Here's what HMRC typically included:
Wages, tips, bonuses, overtime, and taxable benefits from all jobs
Use your P60, P45, or final payslips to calculate the total for the current tax year
Add together employment income from multiple jobs to create a single figure for the household's income for tax
Deductions such as pension contributions taken from pay could be removed when calculating income for tax credits
Foreign employment income had to be converted to pounds using official HMRC exchange rates for the tax year
Income tax deducted from your pay was not relevant to the calculation-HMRC used gross earnings before income tax. Adoption pay and statutory payments from an employer were generally included as part of employment income.
Income from Self-Employment
Self employed people had to declare their trading profits for the tax year, even if they also had employment income. The figure used was the profit shown on your Self Assessment tax return for 2024/25, after allowable business expenses.
Key points:
Foreign trading profits and certain government support grants formed part of trading income for tax credits
Losses could reduce income used for tax credits and in some cases offset other household income within the same tax year
If you gave HMRC an estimate of your profits to keep your award running, you must provide the final figure once your Self Assessment return is complete
HMRC will adjust your final award based on your actual income, not your estimate
Check your Self Assessment figures carefully before confirming them to HMRC for finalising your last tax credit award.
Other Income (Savings, Pensions and More)
HMRC also looked at other income beyond wages and self employed profits when calculating tax credits. Common items included:
Savings and investment income (bank interest, dividends)
Rental income from a rental property
UK company dividends
Some types of foreign income
Income from certain benefits, including income related employment and support allowance in some cases
State Pension and occupational or personal pension income usually counted as income for tax credits. However, some lump sums-such as the tax-free 25% of a pension pot-were excluded.
Most other income was only counted above a general £300 disregard. For example, if your total savings interest and dividends came to £250 in the year, HMRC ignored them entirely.
Example scenario: A single parent earns £14,000 from employment, receives £800 per year from a small personal pension, and has £200 in savings interest. For tax credit purposes, the employment income of £14,000 would count in full. The pension of £800 counts as other income. The £200 savings interest falls below the £300 disregard and is ignored. The household income for tax credits would be £14,800 in this example.
If any item was missed from an adult dependants grant or a dependants grant (both excluded from tax credit income in most cases), it could affect the final calculation.
Finalising Your Working Tax Credit and Child Tax Credit Awards
Although tax credits stopped on 5 April 2025, HMRC still needs to finalise awards for the last tax year where payments were made. This process can continue well into 2025/26 and beyond.
Here's how the Annual Review process works:
HMRC sends you a letter showing tax credits paid up to 5 April 2025, along with the income and household details they used.
You must check the information carefully and confirm it is right.
If anything is wrong-your income, your working hours, or your household circumstances-contact HMRC by the stated deadline.
You must report changes within one month to HMRC. Failure to report changes can result in a £3,000 fine in serious cases, and failing to report errors can lead to underpayments (where extra money may be due) or overpayments (which HMRC can recover).
If you are acting as an appointee for someone else, you are responsible for checking and finalising that person's tax credit award on their behalf. You must notify HMRC of any changes or errors in the information they hold.
If you think your income figures for a previous year were wrong, you should still contact HMRC-even though the system has closed, corrections to past awards can still be processed.
What to Claim Now Instead of Working Tax Credit
From April 2025, new support is provided through other benefits, and tax credits are no longer an option for fresh claims. You cannot make a new claim for working tax credit or child tax credit, no matter your circumstances.
Here's what's available instead:
Universal credit - For most people of working age on a low income, including those in full-time or part-time work, self employed, or temporarily out of a job. Proof of identity such as a passport or driving licence is required to apply for benefits through the universal credit system.
Pension credit - For those who have reached state pension age. This ensures a minimum level of income and can be claimed alongside other benefits.
Carer's allowance - For those caring for someone at least 35 hours a week.
Disability benefits - Such as Personal Independence Payment, if a health condition affects daily living.
Child benefit - For anyone responsible for a child, regardless of income (though the High Income Child Benefit Charge may apply).
Moving from tax credits to universal credit can change how your income, childcare cost, and other benefits are treated. Check eligibility carefully before making a claim-the payment structure, assessment period, and rules are different.
When using HMRC or DWP online services to apply, you may encounter a security service step where the website checks you are not one of many malicious bots attempting access. If you see a page asking you to wait while the uk performing security verification check runs, simply wait for the security verification process to complete. Once verification successful, you will be redirected to the application. If you encounter issues, note down any respond ray id shown on the screen and contact the relevant helpline.
Universal Credit and Income from Work
Universal credit also takes account of income for tax-style purposes, but with different rules from working tax credit.
Key differences:
Universal credit is assessed monthly, not annually. This can particularly affect self employed people and those with irregular earnings, since each month's payment reflects that month's income.
Earnings from employment are reported to HMRC through real-time PAYE data and feed directly into your universal credit calculation. Self employed people make monthly declarations.
Other income and other benefits-such as certain pensions or carer's allowance-can reduce your universal credit payment. Check using an up-to-date benefits calculator or seek advice.
Under the old tax credits system, awards were based on previous year income with disregards smoothing out changes. Under universal credit, changes in income affect payments more quickly-sometimes within one month. This means your payment can go up or down from month to month depending on what you earn.
Tax Credits, Other Benefits and Common Overlaps
Many households received tax credits alongside other benefits, and that mix has now changed with the move to universal credit.
In the past, people could receive working tax credit and child tax credit while also claiming child benefit, disability benefits, or carer's allowance. Some "legacy benefits" such as Income Support and income-based Jobseeker's Allowance (a form of income related employment support allowance in some cases) interacted with tax credits. Receiving certain benefits often meant a higher, sometimes maximum, tax credit award because the qualifying income was very low.
Now, if someone claims universal credit, their tax credits stop and their entitlement to other income-related benefits is usually replaced by the single universal credit payment. This bundles together support for housing, children, disability, and caring into one monthly amount paid into your account.
Contributory benefits like new style Jobseeker's Allowance or new style Employment and Support Allowance may still be claimed alongside universal credit in some cases. These are based on national insurance contributions rather than income, so they operate independently.
Frequently Asked Questions
Can I still claim Working Tax Credit or Child Tax Credit after April 2025?
You cannot make a new claim for working tax credit or child tax credit after 5 April 2025, regardless of your income or work status. The only remaining tax credit activity is finalising past awards for the 2024/25 tax year and earlier, based on income and circumstances in those years. If you need ongoing help with living costs or childcare, you will generally need to consider universal credit or, if over state pension age, pension credit instead.
What happens to my Working Tax Credit if I start claiming Universal Credit?
When a person successfully claims universal credit, their tax credit award stops the day before their universal credit claim starts. HMRC will then recalculate their tax credit entitlement for that tax year up to the stop date, using the income and household details that applied in that period. Any overpayment or underpayment of tax credits for the final year may be adjusted, and overpayments can sometimes be deducted from ongoing universal credit payments.
Do I still need to tell HMRC about changes if tax credits have ended?
Once tax credits have fully ended and the final award for 2024/25 is agreed, ongoing changes do not need to be reported for tax credit purposes. However, if HMRC has not yet finalised a past-year award, they may still ask for updated information about that past period, and it is important to respond accurately. You must still tell other departments (such as the Department for Work and Pensions for universal credit or pension credit) about changes that affect current benefits.
How did my State Pension or private pension affect my tax credits?
State Pension and most occupational or personal pension income counted as other income for tax credit purposes in the year it was paid. HMRC normally included the full pension amount before tax but ignored certain one-off tax-free pension lump sums. If you have discovered a pension amount was missed off your 2024/25 figures, contact HMRC as it may affect the final tax credit calculation.
I’m self-employed – what if my profits for 2024/25 were different from my estimate?
If a self employed person gave HMRC an estimated profit figure for 2024/25 to keep their tax credit award running, they must provide the final figure once their Self Assessment return is complete. HMRC will adjust the final working tax credit and child tax credit award for 2024/25 to reflect the actual income, which can lead to an extra payment or an overpayment that needs to be repaid. Correct the figure as soon as you realise the estimate was wrong, and keep tax and business records as evidence.
What is the difference between Working Tax Credit and Universal Credit for someone in work?
Working tax credit required you to meet fixed minimum working hours a week-for example, 30 hours for most people without children or a disability. Universal credit has no fixed minimum hours requirement, so you can work any number of hours and still be entitled to support depending on your earnings and circumstances. Universal credit is also assessed on a monthly basis rather than annually, meaning your payment adjusts more quickly when your income goes up or down.
Can I receive extra money through Universal Credit for childcare?
Yes. Universal credit includes a childcare element for eligible working households, similar in purpose to the old working tax credit childcare element. However, the rules, rates, and how you report childcare costs differ. Under universal credit, you may be able to claim back up to 85% of eligible childcare costs (compared to 70% under working tax credit), but you typically need to pay the childcare provider first and then claim reimbursement. Check the current rules and use a benefits calculator to see what you might be entitled to receive.
Do I need to do anything if I’ve recently received an HMRC Annual Review letter?
Yes. If you have recently received an Annual Review letter from HMRC, read it carefully and check every figure. If anything is wrong-your income, hours, or household details-contact HMRC before the deadline shown on the letter. If everything is correct, you may not need to do anything further, but keep the letter and your supporting documents (such as payslips, P60, and Self Assessment returns) for your records. Acting quickly protects you from penalties and ensures you receive any money you are owed.
